VARDHMAN TEXTILES LTD,LUDHIANA vs. PR.CIT-1, LUDHIANA

आदेश/Order PER BENCH:

All the present appeals have been preferred by the

same assessee. While the appeals in ITA Nos.1264 to

1267/Chd/2019 have been filed against separate orders of

the Learned Commissioner of Income Tax (Appeals)-I,

Ludhiana [in short the ‘Ld.CIT(A)’] dated 26.07.2019, the

appeals in ITA Nos.103 to 106/Chd/2020 have been filed

against the order of the Learned Principal Commissioner of

Income Tax-I, Ludhiana [in short the ‘Ld. Pr.CIT)] dated

26.07.2019.

Both the two groups of appeals relate to the same

assessment years i.e. 2002-03 to 2005-06 and the only issue

involved, it was common ground, related to allowability of

interest on refund u/s 244A of the Income Tax Act, 1961 (in

short ‘the Act’)and the period for which interest is to be

allowed respectively in the two groups of appeals.

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 4 of 28

two sets of appeals arose, the Ld.Counsel for the assessee

pointed out that the Ld.CIT(A), in the second round on

restoration of certain issues by the ITAT, while adjudicating

the issue relating to the treatment of interest received under

TUF Subsidy Scheme, whether capital or revenue, held the

same to be capital in nature but while holding so gave a

direction that the refund generated on account of the claim

of the assessee being so allowed, was not entitled to any

interest thereon since the delay in the grant of refund was

attributable to the assessee as it had originally returned the

said interest as revenue in nature and had for the first time

made this claim only in appeal before the ITAT. Against this

direction of the Ld.CIT(A) the assessee went in appeal before

the ITAT who restored the issue to the CIT(A) on noting that

while giving this direction the assessee had not been heard

at all. Accordingly, in pursuance to this direction the

Ld.CIT(A) passed order afresh and held therein that the

delay in refund was attributable to the assessee but since

the provisions of the Act required the period of delay to be

determined by the Ld. Pr.CIT, as per section 244A of the Act,

he directed the AO to refer the matter to the Ld. Pr.CIT. In

consequence to this direction the matter was referred to the

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 5 of 28

Ld. Pr.CIT who in turn passed his order for all the four

years dated 26.07.2019. The first four set of appeals

accordingly, have been filed against the order of the

Ld.CIT(A) holding the delay in refund to be attributable to

the assessee and directing the AO to refer the matter to the

Pr.CIT, while the other group of four appeals are directed

against the order of the Ld. Pr.CIT so passed on a reference

made by the AO. As is evident, all of them relate to the issue

of interest on refund.

At the outset itself, both the parties conceded that the

order of the Ld. Pr.CIT was not appeable before the ITAT in

terms of section 253 of the Act. In view of the same, the

appeals in ITA Nos.103 to 106/Chd/2020 are dismissed as

non-maintainable.

Nos.1264 to 1267/Chd/2019, since the issue was identical

and arising in the backdrop of identical set of facts, the

Ld.Counsel for the assessee took up the appeal in ITA

No.1264/Chd/2019 as the lead case and made his

arguments based on the said case. We shall be dealing with

the appeal in ITA No.1264/Chd/2019 and our decision

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 6 of 28

rendered therein will apply mutatis mutandis to the rest of

the appeals also.

are as under:

“1 That the order passed by the Ld.CIT(A) is contrary to law and facts of the case. 2. That the Ld.CIT(A) erred in law and on facts in not allowing interest u/s 244a of the income tax act, 1961 to the assessee on the amount of refund in relation to interest reimbursement under TUFS (Technology Upgradation Fund Scheme). 3. That the appellant craves to add/alter/amend any ground of appeal on or before the due date of hearing of appeal.” 5. Reiterating the facts relating to the background in

which the issue of interest on refund arose in the case of

the assessee as above, the Ld.Counsel for the assessee

vehemently opposed the order passed by the Ld.CIT(A) in the

present case. The argument of the Ld.Counsel for the

assessee was that the assessee was entitled to interest on

refund as per the provisions of section 244A(1) of the Act

and there was no delay attributable to the assessee at all so

as to attract the provisions of section 244A(2) of the Act for

referring the matter to the Ld. Pr.CIT by the AO as directed

by the Ld.CIT(A) in his order. Vis-à-vis his contention that

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 7 of 28

the assessee was entitled to interest on the refund for the

entire period of delay as per the provisions of section

244A(1) of the Act, he pointed out that the law stipulates

interest on refund of self assessment tax paid by the

assessee also as per the provisions of section 244A(1)(aa) of

the Act and in the facts of the present case wherein the

assessee had originally returned the interest on TUF subsidy

as its income and paid the taxes thereon, which was

subsequently on a plea raised before the ITAT, restored to

the Ld.CIT(A) and allowed by him as being capital in

nature, the refund arose to the assessee of the self

assessment tax paid by the assessee on the same. He

contended that the provisions of law were simple and clear

and there was no ambiguity in the same at all and required

interest to be paid on the delay for the entire period from

the payment of taxes to the grant of refund. He contended

that the provisions of section 244A(2) requiring reference by

the AO to the Pr.CIT was only in the circumstances where

there was a delay in the “proceedings resulting in refund”.

He stated that merely “making a claim at a later stage” was

not equivalent to delay in the proceedings of refund. That

there was difference between the two phrases and making a

claim at a later stage did not tantamount to delay in the

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 8 of 28

proceedings of refund. He stated that his claim for interest

on refund for the entire period as specified in section

244A(1) of the Act was supported by various judicial

decisions of the Hon'ble High Court and even Hon'ble

Supreme Court. He drew our attention to the following

decisions in this regard:

Ld.CIT(A) in the case of Tata Chemical Ltd. and Ajanta

Manufacturing Ltd. was incorrect. The Ld.Counsel for the

assessee raised another contention before us being that the

powers of the Ld.CIT(A) enumerated u/s 251 of the Act did

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 9 of 28

not permit restoration of any issue to the AO and, therefore,

the restoration of the issue by the Ld.CIT(A) in the present

case was against the provisions of law and, for this reason

also the order of the Ld.CIT(A) needed to be set aside.

the order of the Ld.CIT(A). His contentions in brief were that

since the assessee had originally returned the interest on

TUF subsidy as its income and staked his claim for the same

to be treated as non taxable, being capital in nature, only in

appeal before the ITAT, the delay in refund was not on

account of any fault of the Department but was squarely

attributable to the assessee for making a delayed claim. He,

therefore, contended that the Ld.CIT(A), therefore, had

rightly invoked the provisions of section 244A(2) of the Act

by directing the AO to refer the issue to the Ld. Pr.CIT. In

this regard, he referred and relied upon the following

decisions:

the Ld.Counsel for the assessee before us on facts. The Ld.

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 10 of 28

DR also contended that since the Ld.CIT(A) had directed the

AO to make a reference to the Pr.CIT for determining the

period to be excluded for payment of interest, the assessee

ought to have waited for the decision of the Ld.Pr.CIT before

filing the appeal and therefore the present appeals were not

maintainable.

writing and also copies of various judgments on which

reliance was placed.

have gone through the relevant provisions of law, orders of

the authorities below and also the case laws referred to

before us.

of interest on refund, which is provided u/s 244A of the Act.

The peculiar set of facts in which the refund arose in the

present case are on account of the Ld.CIT(A) allowing

assessee’s claim of the interest on TUF subsidy being

treated as capital in nature, which originally the assessee

had treated as revenue in nature including the same in its

income returned for taxation and had paid taxes on the

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 11 of 28

same also. That the occasion for the Ld.CIT(A) to allow this

claim arose on the assessee raising additional grounds

before the ITAT in quantum proceedings which were duly

admitted by the ITAT and thereafter restored to the

Ld.CIT(A) for adjudication who allowed the claim of the

assessee. Therefore, the refund arose to the assessee on

account of acceptance of a claim of non-taxability of a

receipt in appellate proceedings, which receipt was

originally returned by it as taxable and the claim was made

for the first time only before the second appellate

authority.

since the assessee itself delayed making the claim of

treating the income as non-taxable, the delay in refund was

on account of this delayed claim made by the assessee and,

therefore, it was not entitled to interest on the period of

delay attributable to it. Reference has been made to the

provisions of section 244A(2) of the Act for the said purpose.

there is no delay attributable to the assessee at all and

that the only delay recognized by section 244A(2) of the Act

relates to delay in proceedings attributable to the assessee.

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 12 of 28

That making a delayed claim does not tantamount to

delaying proceedings and, therefore, section 244A(2) of the

Act is not applicable. That the allowance of the claim of non

taxability of a receipt only recognises the position of law

that the assessee was never required to pay taxes on these

receipts. And having paid taxes, therefore, was entitled to

refund of the surplus taxes so paid and interest thereon

for the period it remained with the Revenue Department.

different subsections to section 244A, to adjudicate the

issue therefore it is relevant to reproduce the relevant

provisions of section 244A :

“244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :— (a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period,— (i) from the 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before the due date specified under sub-section (1) of section 139; or

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 13 of 28

(ii) from the date of furnishing of return of income to the date on which the refund is granted, in a case not covered under sub-clause (i); (aa) where the refund is out of any tax paid under section 140A, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date of furnishing of return of income or payment of tax, whichever is later, to the date on which the refund is granted: Provided that no interest under clause (a) or clause (aa) shall be payable, if the amount of refund is less than ten per cent of the tax as determined under sub- section (1) of section 143 or on regular assessment; (b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. Explanation.—For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. (1A) …….. [(1B) …..... (2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee [or the deductor, as the case may be,] whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable under sub-section (1) or (1A) [or (1B)], and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final. (3) …….. (4) ………

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 14 of 28

laid down in subsection (1), a bare perusal of which reveals

that any refund due to an assessee is to be compensated

with interest for the entire period for which the surplus

amount remains with the State/Government. The Section is

very clear and there is no ambiguity in the same. All refunds

of advance payments of taxes in the form of TDS, TCS and

advances taxes paid, are to be compensated for the period

from the first day of assessment year to the grant of refund.

While all self assessment taxes or other taxes paid are to be

compensated for the periods from the date of filing of return

of income or the date of payment of taxes whichever is later,

to the grant of refund. The only caveat or exception is

provided in subsection (2),that where any proceedings of

refund are delayed by the assessee, this period is to be

excluded from the period for which interest is to be paid.

Further it is only the Ld. Pr.CIT who is empowered to decide

the period of delay.

granted is compensatory in nature. The Hon’ble Apex Court

has categorically stated so in the case of Union of India vs

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 15 of 28

Tata Chemicals Ltd(2014) 43 taxmann.com 240,at para 37 of

its order as under:

“37.A “tax refund” is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/assessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/ deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/ deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/ foreign company.” 17. Having said so and coming to the facts of the present

case, the issue in dispute is whether or not the act of

making a claim belatedly by the assessee resulting in refund

tantamounts to “delay in proceedings resulting in refund” as

mentioned in section 244A(2) of the Act for the purpose of

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 16 of 28

excluding the aforesaid period by referring the matter to the

Ld. Pr.CIT.

allowed at any stage resulting in refund whether in the first

appellate stage, the second appellate stage or even before

the Hon'ble High Court or Hon'ble Supreme Court, only

recognises the position that the assessee was never required

to pay taxes on that portion of the income. The entire

process envisaged under law, of assessments and appeals is

a continuous process of assessing true and correct income

of the assessee, beginning with the assessee himself

disclosing the same in his return of income and the same

thereafter being scrutinized in assessment and thereafter

any adverse conclusion drawn thereon being challenged

before the appellate authorities and higher judicial

authority. The entire process, therefore, of assessment and

appeals culminates in the determination of true and correct

income on which the assessee was required to pay its taxes.

Any claim allowed to the assessee at any stage whether

made for the first time or whether taken up in appeal only

underlines the position that no taxes were required to be

paid by the assessee on the said claim at all. Therefore, in

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 17 of 28

such circumstances, the refund generated on account of the

same, having been retained by the State unlawfully is

entitled to be compensated with interest for the entire

period for which it is so retained.

taxes due on the correct taxable incomes and it is the duty

of the Department to determine the true and correct income

and guide the assessee in the process. They are not and

cannot be entitled to take the benefit of the ignorance of the

assessee and collect undue taxes. Therefore any taxes

mistakenly paid and unlawfully retained by the State have

to be compensated with interest on refund.

that where any proceedings where the claim of the assessee

is being adjudicated or determined, the assessee resorts to

methods which delay the proceedings thereby increasing

period for which interest is to be given, It is such period

which is to be excluded for the purpose of calculating the

interest.

relied upon by the Ld.Counsel for the assessee before us.

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 18 of 28

Manufacturing Ltd.(supra),while dealing with an identical

issue wherein the assessee had raised a belated claim by

revising its return and the Revenue had contended that on

account of the belated claim the refund had been delayed

and therefore the assessee was not entitled to interest for

the period of such delay, categorically held that mere raising

a belated claim cannot be said to be reasons for delaying the

proceedings attributable to the assessee. It went on to hold

that the allowance of claim by the appellate commissioner

only tantamount to allowing a claim in law which was

allowable by the Assessing Officer. The Hon’ble High Court

held that it is only where the assessee is responsible for

delaying the assessment or appellate proceedings that would

tantamount to delay in proceedings resulting in refund. The

relevant findings at para 16-17 of the order are as under;

“16. We would also examine the order of the Commissioner on merits. As noted, according to the Commissioner the assessee had raised a belated claim during the course of the assessment proceedings which resulted into delay in granting of refund and therefore, the assessee was not entitled to interest for the entire period from the first date of assessment year till the order giving effect to the appellate order was passed. We cannot uphold the view of the Commissioner. First and foremost requirement of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the reasons attributable to the assessee, whether wholly or in part. If such requirement is

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 19 of 28

satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. The act of revising a return or raising a claim during the course of the assessment proceedings cannot be said to be the reasons for delaying the proceedings which can be attributable to the assessee. Mere fact that the claim came to be granted by the Appellate Commissioner, would not change this position. In essence, what the Commissioner (Appeals) did was to allow a claim which in law, in his opinion, was allowable by the Assessing Officer. In other words, by passing order in appeal, he merely recognized a legal position whereby, the assessee was entitled to claim certain benefits of reduced tax. Surely, the fact that the assessee had filed the appeal which ultimately came to be allowed by the Commissioner, cannot be a reason for delaying the proceedings which can be attributed to the assessee.

“6. Sub-section (2) of section 244A provides that the assessee shall not be entitled to interest for the period of delay in issuing the proceedings leading to the refund that is attributable to the assessee. In other

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 20 of 28

words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. This is of course an exception to clauses (a) and (b) of section 244A(1) of the Act. In other words, if the issue of the proceedings, that is, refund order, is delayed for any period attributable to the assessee, then the assessee is not entitled to interest of such period. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244a(1) of the Act. In this case, there was no decision by the Commissioner or Chief Commissioner on this issue and so much so, we do not think the Assessing Officer made out the case of delay in refund for any period attributable to the assessee disentitling for interest. So much so, in our view, the officer has no escape from granting interest to the assessee in terms of section 244A(1)(a) of the Act.”

in the case of CIT-8 vs Melstar Information Technologies

Ltd. (supra) held there was no delay attributable to the

assessee where in the facts before it the claim for an

expenditure was made for the first time before the Tribunal

who in turn had remanded the matter to the CIT(A) who had

allowed the claim resulting in refund to the assessee. The

Hon’ble High Court held that there was nothing to suggest

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 21 of 28

that any of the proceedings, before the ITAT or the CIT(A)

were in any manner delayed by the assessee. That therefore

section 244A(2) was not applicable. The relevant findings of

the Hon’ble High Court at para 4-8 of the order are as

under:

“4.The facts on record would show that the assessee had not claimed certain expenditure before the Assessing Officer but eventually raised such a claim before the Tribunal. Upon which, the Tribunal remanded the proceedings to the CIT(A). As such stage, the additional benefit claimed by the assessee was granted. This resulted in refund and the question of payment of interest on such refund. 5. As is well known, in case of refunds payable to the assessee, interest in terms of sub-section (1) of Section 244A would be payable. Sub-section (2) of Section 244A, however, provides that if the proceedings resulting in the refund are delayed for reasons attributable to the assessee whether wholly or in part, the period of delay so attributable, would be excluded from the period for which interest is payable under sub-section (1) of Section 244A of the Act. 6. The Tribunal in the present case came to the conclusion that the delay cannot be attributed to the assessee and therefore, directed payment of interest. 7. Sub-section (2) of Section 244A of the Act refers to the proceedings resulting in the refund which are delayed for the reasons attributable to the assessee. There is no allegation or material on record to suggest that any of the proceedings hit the assessee's appeal before the Tribunal or remanded the proceedings before the CIT(A) whether in any manner delayed on accounts of the reasons attributable to the assessee. The Tribunal, was, therefore correct in allowing the interest to the assessee. 8. We may notice that in the case of Ajanta Manufacturing Ltd Vs. Deputy CIT (Guj) [2017] 391 ITR 33 (Guj) the Division Bench of Gujarat High Court had occasion to consider a similar issue. The assessee had made a belated claim during

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 22 of 28

assessment of filing revised return. According to the Revenue, this would entitle the assessee for claim of interest to the extent of delay. Provisions of sub-rule (2) of Section 244A of the Act were sought to be pressed in service. The Court made following observations: "16. We would also examine the order of the Commissioner on merits. As noted, according to the Commissioner the assessee had raised a belated claim during the course of the assessment proceedings which resulted into delay in granting of refund and therefore, the assessee was not entitled to interest for the entire period from the first date of assessment year till the order giving effect to the appellate order was passed. We cannot uphold the view of the Commissioner. First and foremost requirement of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the reasons attributable to the assessee, whether wholly or in part. If such requirement is satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. The act of revising a return or raising a claim during the course of the assessment proceedings cannot be said to be the reasons for delaying the proceedings which can be attributable to the assessee. Mere fact that the claim came to be granted by the Appellate Commissioner, would not change this position. In essence, what the Commissioner (Appeals) did was to allow a claim which in law, in his opinion, was allowable by the Assessing Officer. In other words, by passing order in appeal, he merely recognized a legal position whereby, the assessee was entitled to claim certain benefits of reduced tax. Surely, the fact that the assessee had filed the appeal which ultimately came to be allowed by the Commissioner, cannot be a reason for delaying the proceedings which can be attributed to the assessee. 17. The Department does not contend that the assessee had needlessly or frivolously delayed the assessment proceedings at the original or appellate stage. In absence of any such foundation, mere fact that the assessee made a claim during the course of the assessment proceedings which was allowed at the appellate stage would not ipso facto imply that the

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 23 of 28

assessee was responsible for causing the delay in the proceedings resulting into refund. We may refer the decision of the Kerala High Court in case of CIT Vs. South Indian Bank Ltd., reported in (2012) 340 ITR 574 (Ker) in which the assessee had raised a belated claim for deduction which was allowed by the Commissioner (Appeals). The Revenue, therefore, contended that for such delay, interest should be declined under Section 244A of the Act. In the said case also, the assessee had not made any claim for deduction of provision of bad debts in the original return. But before completion of the assessment, the assessee had made such a claim which was rejected by the Assessing Officer. The Commissioner allowed the claim and remanded the matter to the Assessing Officer. Pursuant to which, the assessee became entitled to refund. Revenue argued that the assessee would not be entitled to interest in view of Section 244A(2). In this context, the Court held in Para. 6 as under (page 578 of 340 ITR): "6. Sub-section (2) of section 244A provides that the assessee shall not be entitled to interest for the period of delay in issuing the proceedings leading to the refund that is attributable to the assessee. In other words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. This is of course an exception to clauses (a) and (b) of section 244A(1) of the Act. In other words, if the issue of the proceedings, that is, refund order, is delayed for any period attributable to the assessee, then the assessee is not entitled to interest of such period. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244A(1) of the Act. In this case, there was no decision by the Commissioner or Chief Commissioner on this issue and so much so, we

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 24 of 28

do not think the Assessing Officer made out the case of delay in refund for any period attributable to the assessee disentitling for interest. So much so, in our view, the officer has no escape from granting interest to the assessee in terms of section 244A(1)(a) of the Act." 9. In the result, no question of law arises. The appeal is dismissed.”

Commissioner of Income Tax (2015) 53 taxmann.com 18, the

Hon’ble Bombay high court held that there is no provision

for rejecting the claim of interest on account of a mistake by

the assessee. That such a proposition would render the

section otiose since excess taxes paid originate on account

of some mistake either on fact or law on the part of the

assessee. That it is only delay in disposal of proceedings

resulting in refund attributable to the assessee which are

not to be compensated with interest. The relevant findings

at para 13 are as under:

“13. The Assessing Officer has been given no discretion in the matter of granting interest. The amount of interest has to be paid to an assessee in terms of Section 244A of the Act. The only limitation provided therein under Section 244A of the Act is under sub-section 2 thereof which mandates that where any refund results to an assessee, while computing the interest payable thereon, the delay which is attributable to the assessee, in obtaining the refund would be excluded. The Act itself does not provide for rejecting the claim for interest on account of a mistake committed by an assessee. If such a proposition is to be accepted then all excess amounts of tax paid by the assessee on account of a mistake would stand

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 25 of 28

rejected rendering Section 244A of the Act otiose. Section 244A of the Act provides for interest on refunds in respect of any amount which has been paid in excess to that otherwise payable under the law. In most cases the excess amount paid as tax would originate on account of some mistake either on fact or of law on the part of the assessee. Advisedly the Act does not empower the authorities to reject a claim for interest on account of a mistake committed by the assessee.”

said to tantamount to delay in proceedings resulting in

refund attributable to the assessee.

distinguishable on facts. In the case of Pala Marketing Co-

op Society (supra) the return of income itself had been filed

belatedly and had been rejected but thereafter only when the

matter went up to the Hon’ble High Court the delay was

condoned and the return accepted. In such circumstances

the Court held that the condonation of delay was only for

the purpose of accepting return and that otherwise it could

not be said that delay was not attributable to the assessee.

The Hon’ble High court in this backdrop of facts held that

liability to pay interest on refund arises from the date when

the claim for refund is made with all necessary particulars.

The same cannot be equated with a situation where there is

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 26 of 28

no delay in filing return of income but it is only a legitimate

claim which is claimed and allowed in appellate proceedings.

assessee had already been granted refund on processing of

its return u/s 143(1) of the Act and subsequently it had

filed a revised return claiming further refund. In this

backdrop of facts the Hon’ble court held that the later

refund could only relate back to the filing of revised return.

that the assessee was entitled to interest on the refund

generated for the entire period of delay as envisaged under

the provisions of section 244A(1)(b) of the Act that there was

no delay attributable to the assessee in the proceedings

resulting in refund and, therefore, the provisions of section

244A(2) of the Act were not attracted in the present case.

The order of the Ld.CIT(A) holding so is held to be not in

accordance with law.

had no power to restore the matter to the AO, we do not find

any merit in the same since the Ld.CIT(A) has only given a

direction to the AO to refer the matter to the Ld.Pr.CIT,

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 27 of 28

which surely does not tantamount to restoring the issue to

the AO. This argument of the Ld.Counsel for the assessee is

therefore dismissed.

had not adjudicated the issue, having directed the AO to

refer the matter to the Ld.Pr.CIT, no appeal lay against this

order, we do not find any merit in the same. The limited

scope of the power with the Ld.Pr.CIT, as per sub section (2)

of section 244A, is determination of period of delay

attributable to the assessee. He has no power to decide the

entitlement of grant of refund. The direction of the Ld.CIT(A)

to the AO to make a reference is only to this limited extent,

which arises and could have arisen only while holding the

assessee not entitled to grant of interest for the entire

period of delay. It is this order of the Ld.CIT(A) which has

been challenged before us. The argument of the Ld.DR

therefore that the order of the Ld.CIT(A) could not have been

challenged is clearly devoid of any merits and is thus

dismissed.

Nos.1264 to 1267/Chd/2019 are allowed and the appeals of

ITA Nos.1264 to 1267/Chd/2019 & ITA Nos.103 to 106/Chd/2020 A.Ys. 2002-03 to 2005-06 Page 28 of 28

the assessee in ITA Nos.103 to 106/Chd/2020 are dismissed as non-maintainable.

Order pronounced on 30 th July, 2021.

Sd/- Sd/- (R.L. NEGI) (ANNAPURNA GUPTA) लेखा सद�य/Accountant Member �याय�क सद�य/Judicial Member

Dated: 30th July, 2021 *रती*

आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar